The Chinese government on Thursday announced what some industry analysts called the most aggressive and generous solar power subsidy in the world, giving Chinese solar companies a big market boost amid a generally gloomy outlook for short-term growth.

Shares of Chinese solar companies soared on Thursday's news, though some were giving up part of their gains in Friday morning trading.

American depository shares of Suntech Power Holdings (NYSE: STP) gained $3.44, or 43.8 percent, to close at $11.29 on Thursday but were down 43 cents, or 3.8 percent, to $10.86 in Friday morning trading.

Trina Solar (NSDQ: TSL) likewise saw a Thursday gain of $3.54, or 40.8 percent, to close at $12.19, but were down 11 cents, or 0.9 percent, to $12.08 in Friday morning trading.

JA Solar Holdings Co. (NDSQ: JASO) closed ahead by $1.11, or 41.7 percent, at $3.77 on Thursday, and had added 18 cents, or 4.8 percent, to rise to $3.95 in Friday morning trading.

"This new stimulus package is clearly a positive, but we believe stocks have over-reacted to the news," Deutsche Bank analysts Steve O'Rourke, Peter Kim and Hari Polavarapu wrote in a Thursday research note. "Our near-term outlook for the broader solar PV industry remains negatively biased as credit issues drive prices down and inventories up."

noted Friday that the Chinese subsidy plan, while "an unexpected boost to global demand," didn't provide many details on when it would be implemented and how it would be structured.

Still, the Chinese subsidy announcement – combined with European nations' existing feed-in tariffs and other supports for solar power, as well as new and more generous U.S. solar incentives (see Obama Signs Stimulus Package) – gave the analysts hope that prices would stabilize from their downward march, helping to stem the build-up of inventory throughout the silicon solar panel supply chain.

"We also do not know if China will dictate a domestic-produced requirement as they have done for the wind industry," the analysts wrote. China has built up a sizeable solar industry based almost entirely on exports, but several large-scale domestic solar power projects have been announced in the past year (see China Plans World's Largest Solar Power Plant).

Steve Chadima, vice president of external affairs with Suntech, said earlier this week that the company was bidding on a 10 megawatt solar field being supported by the Chinese government, and "We expect hundreds if not thousands of megawatts to follow" in the coming years (see this Green Light post).

But in the shorter term, the few solar power projects being built in the first quarter of this year have generally favored "Western" solar panels for quality assurance reasons, forcing Chinese panel manufacturers to offer steeper discounts on their products, RBC Capital Markets noted.

How the subsidies might play into a host of Chinese government actions aimed at cleaning up the country's environment also remains to be seen (see Will the Olympics Make China Green?).